Mark C. Gasbarra

Internal Revenue Service Notice 2023-80 (hereinafter “the notice”) provides the US government’s view on the foreign tax credit treatment of Pillar Two top-up taxes and makes a clear distinction between qualified domestic minimum top-up tax (QDMTT) and the extra-jurisdictional top-up taxes imposed by an income inclusion regime (IIR) and the backstop undertaxed profits rule (UTPR).

When the United States adopted the book minimum tax in July 2022 as part of the Inflation Reduction Act, it became clear that the country was not racing to implement Pillar Two issued by the Organisation for Economic Co-operation and Development in March 2022. But the enactment of the minimum tax on book income nonetheless showed that Congress was not prepared to let US multinationals feast on the benefits of tax deferral either.

Our article, “GloBE Meets GILTI,” which appeared in the January/February issue of Tax Executive, addressed how taxes on global intangible low-taxed income (GILTI) might be allocated. Sadly, the story was already out of date by publication. This follow-up article addresses not the possibilities, but rather what the Organisation for Economic Co-operation and Development (OECD) actually did on this issue.